What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2026-02-25 compared with 2025-02-24 · 281 added, 243 removed, 835 unchanged (39% of the section changed)

22 unchanged sentences

February 25, 2026

/S/ BRENDA K.

/S/ PRITHVI S.

Senior Vice President and Chief Financial Officer

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During the quarter ended December 31, 2025 , no ne of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as identified in Item 408(c) of Regulation S-K).

Retention Agreement.

On February 24, 2026, the Company entered into a Retention Agreement with Prithvi S.

Gandhi, the Company’s Senior Vice President, Chief Financial Officer, pursuant to which the Company will award restricted stock units (RSUs) to Mr.

Gandhi, with the RSUs vesting only if Mr.

Gandhi is actively employed by the Company on February 24, 2029 (the Retention Date).

The aggregate value of the RSUs is $750,000.

The number of RSUs shall be based upon the closing market price of the stock on February 24, 2026.

The RSUs will be granted pursuant to the Trex Company, Inc.

2023 Stock Incentive Plan.

The Retention Agreement provides that the RSUs shall vest, and the cash payment will be made, in the event of the death or disability of the Recipient, if the Company terminates the Recipient’s employment without “cause”, or if the Recipient resigns for “good reason,” prior to the Recipient achieving the applicable Retention Date.

For this purpose, “cause” shall mean (i) Recipient’s willful or grossly negligent misconduct, or subversive, disruptive or insubordinate behavior, that is injurious to the Company or that violates Company policy;

(ii) Recipient’s embezzlement or misappropriation of funds or property of the Company;

(iii) Recipient’s conviction of a felony or the entrance of a plea of guilty or nolo contendere to a felony;

(iv) Recipient’s conviction of any crime involving fraud, dishonesty, moral turpitude or breach of trust or the entrance of a plea of guilty or nolo contendere to such a crime;

or (v) Recipient’s willful failure or refusal by Recipient to devote Recipient’s full business time (other than on account of disability or approved leave) and attention to the performance of Recipient’s duties and responsibilities if such breach has not been cured within 15 days after written notice thereof is given to the Recipient by the Board, and “good reason” shall mean (i) a material and adverse change in Recipient’s status or position(s) as an officer or management employee of the Company, including, without limitation, any adverse change in his status or position as an employee of the Company as a result of a material diminution in Recipient’s duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to Recipient of any duties or responsibilities which are materially inconsistent with such status or position(s) (other than any isolated and inadvertent failure by the Company that is cured promptly upon his giving notice), or any removal of Recipient from or any failure to reappoint or reelect Recipient to such position(s) (except in connection with Recipient’s termination other than for good reason);

(ii) a 10% or greater reduction in Recipient’s aggregate base salary and targeted bonus, other than any such reduction proportionately consistent with a general reduction of pay across the executive staff as a group, as an economic or strategic measure due to poor financial performance by the Company;

(iii) the failure by the Company or any successor to continue in effect any material employee benefit plan (excluding any equity compensation plan) in which the Recipient is participating (or plans providing the Recipient with similar benefits that are not materially reduced in the aggregate) other than as a result of the normal expiration of any such plan in accordance with its terms;

or the taking of any action, or the failure to act, by the Company or any successor which would adversely affect the Recipient’s continued participation in any of such plans on at least as favorable a basis to Recipient or which would materially reduce Recipient’s benefits under any of such plans, or (iv) Company’s requiring Recipient to be based at an office that is both more than 50 miles from where Recipient’s office is located and further from Recipient’s then current residence.

The Board of Directors has implemented this Retention Agreement reflecting their confidence in Mr.

Gandhi’s ability to continue to provide outstanding results and encourage him to continue to focus on the current and future growth of the Company.

The foregoing description of the Retention Agreement is qualified in its entirety by reference to the full text of the Retention Agreement, which is filed as Exhibit 10.10 hereto.

Disclosure R egarding Foreign Jurisdictions that Prevent Inspections

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Amended and Restated Severance Agreement dated July 31, 2025 by and between Trex Company, Inc.

July 31, 2023

August 4, 2025

Form of Severance Agreement between Trex Company, Inc.

and Officers other than the Chief Executive Officer.

July 31, 2023

August 4, 2025

Form of Retention Agreement between Trex Company, Inc.

Fernandez dated October 30, 2025.

November 4, 2025

Form of Retention Agreement between Trex Company, Inc.

and Prithvi S.

Gandhi dated February 24, 2026.

AIA document A141 – 2014 Agreement dated July 7, 2022 by and between Trex Company, Inc.

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December 30, 2022

Preferability Letter of Ernst & Young LLP, Independent Registered Public Accounting Firm.

Insider Trading Policy

February 26, 2024

Subsidiaries of the Company.

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

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February 24, 2025

Incorporated by reference

Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.

Incorporated by reference

Cover Page Interactive Data File—The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

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President and Chief Executive Officer (Principal Executive Officer);

/S/ Brenda K.

/S/ P rithvi S.

Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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Christian Keffer

/S/ Melkeya Mcduffie

Melkeya McDuffie

/S/ Patricia B.

/S/ I rene Tasi

/S/ Gerald Volas

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2026 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has elected to change its method of accounting for inventories from the last-in, first-out method to the first-in, first-out method, effective October 1, 2025, with retrospective application to all periods presented.

Our opinion is not modified with respect to this matter.

Basis for Opinion

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Surface Flaking Warranty Reserve

Product Warranty Liability

Description of the Matter

At December 31, 2024, the Company’s surface flaking warranty reserve was $7.2 million.

As discussed in Note 19 of the consolidated financial statements, the Company continues to receive and settle claims for decking products manufactured at its Nevada facility prior to 2007 that exhibit surface flaking and maintains a warranty reserve to provide for the settlement of these claims.

The Company’s surface flaking warranty reserve is based on management’s estimate of the number of claims to be settled with payment and the average cost to settle each claim.

Auditing the surface flaking warranty reserve is complex because it involves the estimation of the number of claims to be settled with payment and requires the use of actuarial specialists.

This estimate has a significant effect on the surface flaking warranty reserve.

At December 31, 2025, the Company’s product warranty liability was $29.7 million.

As discussed in Note 19 of the consolidated financial statements, the Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claim projections.

Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates.

Auditing aspects of the product warranty liability was complex and highly judgmental due to the significant estimation of numerous variables required in determining the liability.

In particular, the estimate was sensitive to significant assumptions such as the estimated number of future claim counts and costs incurred to settle claims.

These assumptions have a significant effect on the product warranty liability.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s process to estimate the number of claims to be settled with payment.

To test the estimated number of claims to be settled with payment, our audit procedures included, among others, evaluating the methodology and the significant assumptions used by management.

We also involved an actuarial specialist to assist us in independently calculating a range of the expected number of claims to be settled with payment and compared that to the Company’s range.

We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s process to estimate the general product warranty liability, including controls over management’s review of the significant assumptions described above.

We also tested management’s controls over the completeness and accuracy of the data used in the model.

To audit the product warranty liability recorded by management, we performed procedures that included, among others, evaluating the methodology applied and the significant assumptions used in the Company’s calculation.

We tested the completeness and accuracy of the claims data used by management.

We performed analyses to determine the sensitivity of changes in the significant assumptions described above.

We also involved an internal actuarial specialist to assist in our evaluation of the methodology applied and significant assumptions utilized by management to calculate the product warranty liability.

/s/ Ernst & Young LLP

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Expenditures for property, plant and equipment

Purchased intangibles

Proceeds from sale of assets

Internally developed and purchased intangibles

Proceeds from sales of property, plant and equipment

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Financing costs

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Supplemental non-cash investing and financing disclosure:

Capital expenditures in accounts payable

(Decrease) increase in capital expenditures in accounts payable

See Notes to Consolidated Financial Statements.

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Trex Company, Inc.

(Trex), a Delaware corporation, was incorporated on September 4, 1998.

Through December 30, 2022, Trex had one wholly-owned subsidiary, Trex Commercial Products, Inc.

Together, Trex and Trex Commercial Products, Inc.

are referred to as the Company.

Through December 30, 2022, the Company operated in two reportable segments, Trex Residential Products (Trex Residential) and Trex Commercial Products (Trex Commercial).

On December 30, 2022, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiary and reportable segment, Trex Commercial.

Refer to Note 3 below for more information on the sale.

Subsequent to December 30, 2022, the Company operates in one reportable segment, Trex Residential.

The Company’s principal business based on net sales is the manufacture and distribution of Trex Residential high-performance, low-maintenance wood-alternative decking and residential railing and outdoor living products and accessories, marketed under the brand name Trex ® .

(Trex or Company), a Delaware corporation, was incorporated on September 4, 1998.

The Company operates in a single reportable segment.

The Company’s principal business based on net sales is the manufacture and distribution of high-performance, low-maintenance wood-alternative decking and railing and outdoor living products and accessories, marketed under the brand name Trex ® .

A majority of its products are manufactured in a proprietary process that combines reclaimed wood fibers and recycled polyethylene.

Trex Commercial designed, engineered and marketed modular and architectural railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues.

The principal executive offices are located at 2500 Trex Way, Winchester, Virginia 22601, and the telephone number at that address is (540) 542-6300.

CHANGE IN ACCOUNTING PRINCIPLE FOR INVENTORY VALUATION

During the fourth quarter, the Company changed its accounting method of valuing inventory from a last-in, first-out (LIFO) method to a first-in, first-out (FIFO) method.

The Company believes this change in accounting method is preferable as it:

• More accurately reflects the value of inventory on the consolidated balance sheet at each reporting period;

• Is consistent with how the Company manages its business as it reflects the actual flow of inventory in operations and is consistent with business planning;

• Is on a more comparable basis with the primary competitors in its industry peer group

The Company has retrospectively applied the effects of the accounting change to all periods presented.

The following tables summarize the effect of the accounting change from LIFO to FIFO on impacted line items in the Company’s consolidated financial statements as follows:

Consolidated Statements of Comprehensive Income

Year Ended December 31, 2023

(In thousands, except share and per share data)

As Previously Reported

Effect of Change in Accounting Principle

Cost of sales

Selling, general and administrative expenses

Income from operations

Interest (income) expense, net

Income before income taxes

Provision for income taxes

Basic earnings per share

Basic weighted average common shares outstanding

Diluted earnings per share

Diluted weighted average common shares outstanding

Comprehensive income

Consolidated Statements of Comprehensive Income

Year Ended December 31, 2024

(In thousands, except share and per share data)

As Previously Reported

Effect of Change in Accounting Principle

Cost of sales

Selling, general and administrative expenses

Income from operations

Interest (income) expense, net

Income before income taxes

Provision for income taxes

Basic earnings per share

Basic weighted average common shares outstanding

Diluted earnings per share

Diluted weighted average common shares outstanding

Comprehensive income

The only interim period impacted in 2024 was the fourth quarter, as there were no interim LIFO adjustments recognized during the first three quarters of 2024.

There were no interim LIFO adjustments in 2025.

Consolidated Statements of Comprehensive Income

Quarter Ended December 31, 2024

(In thousands, except share and per share data)

As Previously Reported

Effect of Change in Accounting Principle

Cost of sales

Selling, general and administrative expenses

Income from operations

Interest (income) expense, net

Income before income taxes

Provision for income taxes

Basic earnings per share

Basic weighted average common shares outstanding

Diluted earnings per share

Diluted weighted average common shares outstanding

Comprehensive income

Consolidated Balance Sheets

December 31, 2024

(in thousands)

As Previously Reported

Effect of Change in Accounting Principle

Current assets:

Total current assets

Liabilities and Stockholders' Equity

Deferred income taxes

Total liabilities

Stockholders' equity:

Retained earnings*

Total stockholders' equity

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

* As a result of the accounting change, retained earnings as of January 1, 2023 increased from $ 1.1 billion, as originally reported using the LIFO method, to $ 1.2 billion using the FIFO method .

Consolidated Statements of Cash Flows

Year Ended December 31, 2023

(in thousands)

As Previously Reported

Effect of Change in Accounting Principle

Operating Activities:

Consolidated Statements of Cash Flows

Year Ended December 31, 2024

(in thousands)

As Previously Reported

Effect of Change in Accounting Principle

Operating Activities:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The consolidated financial statements include the accounts of the Company.

Intercompany accounts and transactions have been eliminated in consolidation.

The Company’s results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, tariffs, consumer spending and preferences, interest rates, the impact of any supply chain disruptions, economic conditions, and/or any adverse effects from global health pandemics and geopolitical conflicts.

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The Company routinely assesses the financial strength of its customers and believes that its trade receivables credit risk exposure is limited.

Trade receivables are recognized at the amount of revenue recognized on each shipment for Trex Residential products as the Company has an unconditional right to consideration from the customer and payment is due based solely on the passage of time.

Trade receivables are recognized at the amount of revenue recognized on each shipment for Trex products as the Company has an unconditional right to consideration from the customer and payment is due based solely on the passage of time.

An estimate of expected credit losses is recognized as a valuation allowance and adjusted each reporting period.

1 unchanged sentence

There was no material valuation allowance recorded as of December 31, 2025 and December 31, 2024.

In the years ended December 31, 2024 , 2023, and 2022, sales to certain customers of Trex Residential accounted for 10 % or more of the Company’s total net sales.

For the year ended December 31, 2024 , three customers of Trex Residential represented approximately 81 % of the Company’s total net sales.

For the year ended December 31, 2023 , three customers of Trex Residential represented 72 % of the Company’s total net sales.

For the year ended December 31, 2022 , three customers of Trex Residential

represented approximately 64 % of the Company’s total net sales.

In the years ended December 31, 2025, 2024, and 2023, sales to certain customers accounted for 10% or more of the Company’s total net sales.

For the year ended December 31, 2025 , three customers represented approximately 73 % of the Company’s total net sales.

For the year ended December 31, 2024 , three customers represented 81 % of the Company’s total net sales.

For the year ended December 31, 2023 , three customers represented approximately 72 % of the Company’s total net sales.

No other customer represented 10% or more of the Company’s total net sales.

At December 31, 2025 , two customers represented 22 %, and 21 %, respectively, of the Company’s total accounts receivable balance.

At December 31, 2023 , three customers represented 27 %, 23 % and 20 %, respectively, of the Company’s total accounts receivable balance.

For each year ended December 31, 2024 , 2023, and 2022, approximately 21.4 %, 26.7 %, and 17.5 %, respectively, of the Company’s materials purchases at Trex Residential were purchased from its four largest suppliers.

Inventories for the composite decking and railing products at Trex Residential are valued at the lower of cost (last-in, first-out, or LIFO, method) and market as this method results in a better matching of costs and revenues.

The Company periodically reviews its inventory for slow moving or obsolete items and writes down the related products to the lower of cost or market.

At December 31, 2024 , two customers represented 33 % and 32 %, respectively, of the Company’s total accounts receivable balance.

For each year ended December 31, 2025 , 2024, and 2023, approximately 23.3 %, 21.4 %, and 26.7 %, respectively, of the Company’s materials purchases were purchased from its four largest suppliers.

Inventories for the composite decking and railing products at Trex are valued at the lower of cost (first-in, first-out, or FIFO, method) and net realizable value as this method results in a better matching of costs and revenues.

The Company periodically reviews its inventory for slow moving or obsolete items and writes down the related products to the lower of cost or net realizable value.

The Company’s reserves for estimated slow moving products or obsolescence are not material.

At December 31, 2024 , the excess of the replacement cost of inventory over the LIFO value of inventory was approximately $ 49.7 million.

Due to the nature of the LIFO valuation methodology, liquidations of inventories result in a portion of the Company's cost of sales being based on historical rather than current year costs.

There were no LIFO liquidations or related impact on cost of sales in 2024.

A majority of the products at Trex Residential are made in a proprietary process that combines reclaimed wood fibers and scrap polyethylene.

Trex Residential grinds up scrap materials generated from its manufacturing process and inventories deemed no longer salable and reintroduces the reclaimed material into the manufacturing process as a substitute for raw materials.

The reclaimed material is valued at the costs of the raw material components of the material.

A majority of the products at Trex are made in a proprietary process that combines reclaimed wood fibers and scrap polyethylene.

Trex grinds up scrap materials generated from its manufacturing process and inventories deemed no longer salable and reintroduces the reclaimed material into the manufacturing process as a substitute for raw materials.

The reclaimed material is valued at the cost of the raw material components of the material.

Property, Plant and Equipment

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At inception of an arrangement, the Company evaluates, among other things, whether it has the right to control the use of an identified asset in order to determine if the arrangement is or contains a lease.

Operating leases are included in operating lease right-of-use (ROU) assets, accrued expenses and other current liabilities, and operating lease liabilities in the consolidated balance sheets.

Operating leases are included in operating lease assets, accrued expenses and other current liabilities, and operating lease liabilities in the consolidated balance sheets.

Operating leases with an initial term of 12 months or less are not included in the consolidated balance sheet.

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Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As the implicit rates of the Company’s leases are not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease

The Company considers instruments with similar characteristics when calculating its incremental borrowing rate.

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Goodwill is considered to be impaired when the net book value of the reporting unit exceeds its estimated fair value.

The Company assigned its goodwill to reporting units and tests each reporting unit’s goodwill for impairment at least on an annual basis, or more frequently if an event occurs or circumstances change in the interim that indicate the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill.

The Company identified its reporting units based on the way it manages its operating segments.

Prior to December 30, 2022, the Company had three reporting units:

a residential reporting unit in the Trex Residential reportable segment, and a commercial railing reporting unit and a staging reporting unit in the Trex Commercial reportable segment.

Subsequent to the sale of Trex Commercial on December 30, 2022, the Company has one reporting unit in the Trex Residential reportable segment.

Each reporting unit constitutes a business with discrete financial information and operating segment management, at a level below the Company’s chief operating decision maker regularly reviews the operating results of the reporting unit.

The Company assigned goodwill to the reporting units based on the excess of the fair values acquired over the fair value of the sum of the individual assets acquired and liabilities assumed that were assigned to the reporting units.

In testing for goodwill impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

Trex has one reporting unit.

In testing for goodwill impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.

If the qualitative assessment indicates that the carrying amount of the reporting unit exceeds its fair value, including goodwill, the Company is then required to perform a quantitative goodwill impairment test.

The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill.

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.

If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of its reporting unit with its carrying amount, including goodwill.

The fair value of its reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

The Company performs the annual impairment testing of its goodwill as of October 31 of each year.

For fiscal years 2024, 2023 and 2022, the Company completed its annual impairment test of goodwill for its Trex Residential reporting segment residential reporting unit utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the residential

reporting unit was less than its carrying amount.

For fiscal years 2025, 2024 and 2023, the Company completed its annual impairment test utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

Qualitative factors the Company considered include events and circumstances such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant Company-specific events, as applicable.

Product Warranty

The Company warrants that for the applicable warranty period its Trex Residential products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.

The Company warrants that for the applicable warranty period its products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.

Products sold on or after January 1, 2023:

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The Company maintains a warranty reserve for the settlement of its product warranty claims.

The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and expected future claims experience.

The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and expected future claims projections.

To estimate future claims projections, the Company utilizes actuarial techniques to determine a reasonable possible range of amounts to be paid related to defects covered by our product warranty.

The actuarial techniques consider claims received, claims closed, and the amounts paid on claims.

Estimates for these elements are quantified using a range of assumptions derived from claim history and consideration of additional factors influencing claim counts or costs incurred to settle claims in order determine the best estimate of future claims for which to record a related liability.

Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates.

Additionally, the Company accrues for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated, as necessary.

Treasury Stock

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Revenue Recognition

Trex Residential Products.

Trex Residential principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly composite decking and railing products and accessories.

Trex principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly composite decking and railing products and accessories.

Substantially all of its revenues are from contracts with customers, which are individual customer purchase orders of short-term duration of less than one year.

Trex Residential satisfies its performance obligations at a point in time.

Trex satisfies its performance obligations at a point in time.

The shipment of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment.

Upon shipment of the product, the customer obtains control over the distinct product and Trex Residential satisfies its performance obligation.

Upon shipment of the product, the customer obtains control over the distinct product and Trex satisfies its performance obligation.

Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less.

Any variable consideration related to the unsatisfied performance obligation is allocated wholly to the unsatisfied performance obligation and recognized when the product ships and the performance obligation is satisfied and is included in “Accrued expenses and other liabilities, Sales and marketing” in Note 8 to these Consolidated Financial Statements.

Trex Commercial Products.

Trex Commercial generated revenue from the manufacture and sale of its modular and architectural railing and staging systems.

All of its revenues were from fixed-price contracts with customers.

Trex Commercial contracts had a single performance obligation as the promise to transfer the individual goods or services was not separately identifiable from other promises in the contract and was, therefore, not distinct.

On December 30, 2022, the Company sold substantially all of the assets of its wholly-owned subsidiary and reportable segment Trex Commercial.

Trex Commercial satisfied its performance obligation over time as work progressed because control transferred continuously to its customers.

Revenue and estimated profit were recognized over time based on the proportion of actual costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the performance obligation.

Incurred costs represent work

performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

Incurred costs included all direct material, labor, subcontract and certain indirect costs.

The Company reviewed and updated its estimates regularly and recognized adjustments in estimated profit on contracts under the cumulative catch-up method.

Under this method, the impact of the adjustment on revenue and estimated profit to date on a contract is recognized in the period the adjustment is identified.

If at any time the estimate of contract profitability indicated an anticipated loss on the contract, the Company recognized the total loss in the period it was identified.

During the year ended December 31, 2022 , no adjustment to any one contract was material to the Company’s Consolidated Financial Statements and no material impairment loss on any contract was recorded.

Stock-Based Compensation

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The Company expenses its branding and advertising communication costs as incurred.

Production costs are deferred and recognized as expense in the period that the related advertisement is first used.

Advertising production costs are deferred and recognized as expense in the period that the related advertisement is first used.

For the years ended December 31, 2025 , 2024, and 2023, branding expenses, including advertising expenses, were $ 61.0 million, $ 53.5 million, and $ 48.8 million, respectively.

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New Accounting Standards Recently Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” The guidance requires disclosure of significant segment expenses which are regularly provided to the chief operating decision maker (CODM), the composition of and amount of other segment items, the CODM’s title and position within the organization, and how the CODM uses the reported measure(s) of segment’s profit or loss to assess the performance of the segment.

In addition, on an interim basis, all segment profit or loss and asset disclosures currently required on an annual basis must be reported, as well as those required by Topic 280.

The guidance allows for multiple measure of a segment’s profit or loss to be reported.

Entities which have a single reportable segment must apply Topic 280 in its entirety.

The guidance was effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

In December 2023, the FASB issued ASU No.

2023-09 , “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The guidance requires public entities to disclose additional categories of information related to federal, state, and foreign income taxes and additional details related to reconciling items should they meet a quantitative threshold.

The guidance requires disclosure of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and to disaggregate the information by jurisdiction based on quantitative thresholds.

The guidance is effective for fiscal year beginning after December 15, 2024.

Early adoption was permitted.

Entities are required to apply the amendments of this update retrospectively for all prior periods presented in the financial statements.

The Company adopted the standard in the quarterly period ended December 31, 2025 .

The Company applied the standard retrospectively and accordingly prior periods were adjusted.

Adoption of this guidance did not impact consolidated results of operations and financial position .

Adoption of this guidance did no t impact consolidated results of operations and financial position.

New Accounting Standards Not Yet Adopted

In September 2025, the FASB issued ASU No.

2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." This guidance clarifies and modernizes when an entity is required to begin capitalizing software costs.

Specifically, it requires capitalization when both of the following are met (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended.

The amendments to this update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.

Early adoption of this update is permitted.

The amendments to this update may be applied prospectively, retrospectively, or on a modified transition approach.

The Company is evaluating this guidance and the impact it may have on its Consolidated Financial Statements upon adoption.

In July 2025, the FASB issued ASU No.

2025-05, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets." This guidance provides an optional practical expedient related to the estimation of expected credit losses for current accounts receivable and contract assets that arise from transactions accounted for under FASB Accounting Standards Codification 606.

Specifically, this optional practical expedient allows an entity to assume that current conditions as of the balance sheet date will not change for the remaining life of the asset.

The amendments to this update are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption of this update is permitted.

The amendments to this update should be applied prospectively.

The Company continues to evaluate the guidance and does not believe adoption will have a material impact on its consolidated results of operations or financial position.

In November 2024, the FASB issued ASU No.

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As such, the Company’s preliminary assessments are subject to change.

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

The guidance is effective for fiscal year beginning after December 15, 2024.

Early adoption is permitted.

The guidance should be applied on a prospective basis, retrospective application is permitted.

The Company does not expect adoption of the guidance to have a material effect on its consolidated results of operations and financial position.

SALE OF TREX COMMERCIAL PRODUCTS, INC.

On December 30, 2022, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiary and reportable segment, Trex Commercial, for net proceeds of $ 7.3 million.

The divestiture reflected the Company’s decision to focus on driving the most profitable growth strategy for the Company and its shareholders through the execution of its outdoor living strategy.

With the sale complete, the Company has dedicated its resources to accelerating conversion to composites from wood and further strengthen its leadership position in the outdoor living category.

The sale resulted in a loss on sale of $ 15.4 million and is reported in the Consolidated Statements of Comprehensive Income.

The divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results and, therefore, was not reported as a discontinued operation.

As such, the results of operations of Trex Commercial are consolidated in the Company’s results of operations for the year ended December 31, 2022.

Refer to Note 17, Segment Information, for additional information on the Trex Commercial segment.

Inventories at LIFO value consist of the following as of December 31 (in thousands):

Inventories at FIFO value consist of the following as of December 31 (in thousands):

Finished goods

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Total FIFO (first-in, first-out) inventories

Reserve to adjust inventories to LIFO value

Total LIFO inventories

Inventory related to Trex Residential composite decking and railing products is stated at the lower of LIFO cost or market.

The Company periodically reviews its inventory for slow moving or obsolete items and writes down the related products to estimated market.

The Company periodically reviews its inventory for slow moving or obsolete items and writes down the related products to estimated net realizable value.

During the year ended December 31, 2025 the Company adjusted reserves for estimated slow moving products or obsolescence.

These reserves are not material.

Under the LIFO method, reductions in inventory cause a portion of the Company’s cost of sales to be based on historical costs rather than current year costs.

There was no inventory reduction in 2024.

During the year ended December 31, 2023, the Company had a liquidation of inventories produced in the prior year ended December 31, 2022.

As a result, a portion of the Company’s cost of sales in 2023 was based on prior year costs rather than on current year costs.

However, the prior year cost of inventory closely approximated the current year cost of inventory and the resulting effect of the liquidation of inventories on the Company’s cost of sales was immaterial in the year ended December 31, 2023.

PREPAID EXPENSES AND OTHER ASSETS

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GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The carrying amount of goodwill at December 31, 2024, and December 31, 2023 , was $ 14.2 million for Trex Residential.

For fiscal years 2024, 2023 and 2022, the Company completed its annual impairment test of goodwill for its residential reporting unit in Trex Residential utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the residential reporting unit was less than its carrying amount.

The Company’s intangible assets, purchased in 2018 and 2024, consist of domain names and internal use software for Trex Residential.

At December 31, 2024, and December 31, 2023 , intangible assets were $ 10.6 million and $ 6.3 million and accumulated amortization was $ 2.8 million and $ 2.4 million, respectively.

Intangible asset amounts were determined based on the estimated economics of the asset and are amortized over the estimated useful lives on a straight-line basis over 15 years for domain names and 10 years for internal use software, which approximates the pattern in which the economic benefits are expected to be received.

The carrying amount of goodwill at December 31, 2025, and December 31, 2024 , was $ 14.2 million for Trex.

For fiscal years 2025, 2024 and 2023, the Company completed its annual impairment test of goodwill for its reporting unit utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the Company's sole reporting unit was less than its carrying amount.

The Company’s intangible assets, purchased in 2018, 2024, and 2025, consist of domain names and internal use software.

Intangible asset amounts were determined based on the estimated economics of the asset and are amortized over the estimated useful lives on a straight-line basis over 15 years for domain names and 10 years for internal use software related to the Company's ERP and other platform tools, which approximates the pattern in which the economic benefits are expected to be received.

The Company evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate an impairment.

Intangible asset amortization expense for the year ended December 31, 2024, December 31, 2023, and December 31, 2022 , was $ 0.4 million, $ 0.4 million, and $ 0.4 million, respectively.

The following table summarizes the Company's intangible assets as of December 31 (in thousands):

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

Intangible Assets Subject to Amortization:

Internal Use Software

Intangible asset amortization expense was $ 0.7 million, $ 0.4 million, and $ 0.4 million for the year ended December 31, 2025, December 31, 2024, and December 31, 2023 .

The following table summarizes the expected amortization expense for intangible assets for the years 2026 through 2030 and thereafter (in thousands):

PROPERTY, PLANT AND EQUIPMENT

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The Company had construction in process as of December 31, 2025 , of approximately $ 372.3 million.

The Company expects that substantially all of the construction in process will be completed and put into service before or during the year ending December 31, 2027.

The Company expects that substantially all of the construction in process will be completed and put into service during the year ending December 31, 2026.

Depreciation expense for the years ended December 31, 2025 , 2024, and 2023, was $ 62.3 million, $ 54.3 million, and $ 49.8 million, respectively.

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Compensation and benefits

Capital Projects

Operating lease liabilities

Capital Projects

Manufacturing costs

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and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 1.20 % and 2.15 %.

The Company had $ 202.6 million in borrowings outstanding under its revolving credit facility and available borrowing capacity of $ 347.4 million at December 31, 2024 .

As of December 31, 2025, the Company had $ 133.5 million in borrowings outstanding under its revolving credit facility.

The total availability under the revolving credit facility was $ 413.4 million as of December 31, 2025, which reflects a reduction for outstanding letters of credit totaling $ 3.1 million.

The weighted average interest rate on the revolving credit facility was 4.62 % as of December 31, 2025.

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The 2023 Stock Repurchase Program has no set expiration date.

The Company repurchased 1,580,640 shares of its outstanding common stock under the 2023 Stock Repurchase Program during 2024.

During 2025 and 2024 the Company repurchased 1,526,927 shares and 1,580,640 shares of its common stock under the 2023 Stock Repurchase Program, respectively.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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Revenue is recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring control of the goods or services to a customer.

Trex Residential Products

Trex Residential principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly wood-alternative composite decking and residential railing products and accessories.

Trex principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly wood-alternative composite decking and railing products and accessories.

Substantially all of its revenues are from contracts with customers, which are purchase orders of short-term duration of less than one year.

Its customers, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products.

Trex Residential satisfies its performance obligations at a point in time.

Trex satisfies its performance obligations at a point in time.

The shipment of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment.

Upon shipment of the product, the customer obtains control over the distinct product and Trex Residential satisfies its performance obligation.

Upon shipment of the product, the customer obtains control over the distinct product and Trex satisfies its performance obligation.

Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less.

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The related accounts receivables are included in “Accounts receivable, net” in the Consolidated Balance Sheets.

Trex Residential may offer various sales incentive programs throughout the year.

Trex may offer various sales incentive programs throughout the year.

It estimates the amount of sales incentive to allocate to each performance obligation, or product shipped, based on direct sales to the customer.

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Changes in estimate allocated to a previously satisfied performance obligation are recognized as a reduction of revenue in the period in which the change occurs under the cumulative catch-up method.

In addition to sales incentive programs, Trex Residential may offer payment discounts.

In addition to sales incentive programs, Trex may offer payment discounts.

It estimates the payment discount that it believes will be taken by the customer based on prior history using the most-likely-amount method of estimation.

Trex Residential pays commissions to certain employees.

Trex pays commissions to certain employees.

However, the sales commissions are not directly attributable to identifiable contracts, are discretionary in nature and are based on other factors not related to obtaining a contract, such as individual performance, profitability of the entity, annual sales targets, etc.

These costs are included in selling, general and administrative expenses as incurred.

Trex Residential does not grant contractual product return rights to customers other than pursuant to its assurance product warranty (see related disclosure on product warranties in Note 19, “Commitments and Contingencies”).

Trex Residential accounts for all shipping and handling fees invoiced to the customer in net sales and the related costs in cost of sales.

Trex Commercial Products

On December 30, 2022, the Company completed the sale of its wholly-owned subsidiary and reportable segment, Trex Commercial.

Prior to December 30, 2022, Trex Commercial generated revenue from the manufacture and sale of its modular and architectural railing and staging systems.

All of its revenues were from fixed-price contracts with customers.

Trex Commercial satisfied its performance obligation over time as work progressed because control transferred continuously to its customers.

Revenue and estimated profit was recognized over time based on the proportion of actual costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the performance obligation.

Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

Incurred costs included all direct material, labor, subcontract and certain indirect costs.

The Company reviewed and updated its estimates regularly and recognized adjustments in estimated profit on contracts under the cumulative catch-up method.

Under this method, the impact of the adjustment

on revenue and estimated profit to date on a contract is recognized in the period the adjustment is identified.

Revenues and profits in future periods are recognized using the adjusted estimate.

If at any time the estimate of contract profitability indicated an anticipated loss on the contract, the Company recognized the total loss in the period it is identified.

During the year ended December 31, 2022, no adjustment to any one contract was material to the Company’s Consolidated Financial Statements.

For each year in the three years ended December 31, 2024 , net sales are disaggregated in the following tables by (1) market (2) timing of revenue recognition, and (3) type of contract.

The tables also include a reconciliation of the respective disaggregated net sales with the Company’s reportable segments (in thousands):

Year Ended December 31, 2024

Reportable Segment

Timing of Revenue Recognition and Type of Contract

Products transferred at a point in time and variable

consideration contracts

Year Ended December 31, 2023

Reportable Segment

Timing of Revenue Recognition and Type of Contract

Products transferred at a point in time and variable

consideration contracts

Year Ended December 31, 2022

Reportable Segment

Timing of Revenue Recognition and Type of Contract

Products transferred at a point in time and variable

consideration contracts

Products transferred over time and fixed price contracts

Trex does not grant contractual product return rights to customers other than pursuant to its assurance product warranty (see related disclosure on product warranties in Note 19, “Commitments and Contingencies”).

Trex accounts for all shipping and handling fees invoiced to the customer in net sales and the related costs in cost of sales.

For each year in the three years ended December 31, 2025 , December 31, 2024, and December 31, 2023 revenue was recognized at a point in time under variable consideration contracts.

STOCK-BASED COMPENSATION

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For performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is probable to be paid out based on the achievement of the predetermined performance measures.

employee stock purchase plan, compensation expense is recognized related to the discount on purchases.

For the employee stock purchase plan, compensation expense is recognized related to the discount on purchases.

The following table summarizes the Company’s stock-based compensation expense (in thousands):

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Total income tax provision

The Company’s effective tax rate for the year ended December 31, 2024 , was 25.9 % and was comparable to the effective tax rate for the year ended December 31, 2023 , of 25.6 %, which resulted in income tax expense of $ 79.3 million and $ 70.8 million, respectively.

The income tax provision differs from the amount of income tax determined by applying the U.S.

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State and local taxes, net of U.S.

Federal benefit

Permanent items

Excess tax benefits from vesting or settlement of stock

compensation awards

Federal credits

Total income tax provision

federal income tax effect (a)

Foreign tax effects

Effect of changes in tax laws or rates enacted in the current period

Effects of cross-border tax laws

Foreign-derived intangible income

Research and development

Energy related tax credits

Changes in valuation allowances

Nontaxable or nondeductible items

Share-based payment awards

Changes in unrecognized tax benefits

Other adjustments

Effective tax rate

(a) State Taxes in California, Illinois, Maryland, Massachusetts, Michigan, New Jersey, and Pennsylvania made up the majority (greater than 50 % of the tax in this category).

The Company’s effective tax rate for the year ended December 31, 2025 , was 26.2 % and was comparable to the effective tax rate for the year ended December 31, 2024 , of 25.9 %, which resulted in income tax expense of $ 67.5 million and $ 83.5 million, respectively.

Taxes paid consist of the following (in thousands):

As of December 31,

Total Taxes Paid

* No jurisdictions were paid in excess of 5 percent of total income taxes paid (net of refunds) .

Deferred tax assets and liabilities consist of the following (in thousands):

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Operating lease liability

Product and surface flaking warranty reserves

Product warranty reserves

State tax credit carryforwards

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The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities.

Such examinations may result in future assessments by these taxing authorities, and the Company has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with accounting

As of December 31, 2024 , for certain tax jurisdictions, tax years 2020 through 2024 remain subject to examination.

As of December 31, 2025, for certain tax jurisdictions, tax years 2021 through 2025 r emain subject to examination.

The Company believes that adequate provisions have been made for all tax returns subject to examination.

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SEGMENT INFORMATION

Through December 30, 2022, the Company operated in two reportable segments.

On December 30, 2022, the Company completed the sale of its wholly-owned subsidiary and reportable segment, Trex Commercial.

Subsequent to the sale of Trex Commercial, the Company operates in one reportable segment, Trex Residential, with resource allocation and assessment of financial performance based on a consolidated basis.

• Trex Residential manufactures composite decking and railing and related outdoor living products marketed under the brand name Trex ® .

The Company operates in one reportable segment, with resource allocation and assessment of financial performance based on a consolidated basis.

Trex manufactures composite decking and railing and related outdoor living products marketed under the brand name Trex®.

The products are sold to its distributors and two national retailers who, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction.

• Trex Commercial designed, engineered, and marketed modular and architectural railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues.

The segment’s products were sold through architects, specifiers, contractors, and others doing business within the segment’s commercial market.

On December 30, 2022, the Company completed the sale of Trex Commercial.

Refer to Note 3 to these consolidated financial statements for additional information on the sale of Trex Commercial.

The Company’s reportable segments are determined in accordance with its internal management structure, which, through December 30, 2022, was based on residential and commercial operations.

The Company’s reportable segments are determined in accordance with its internal management structure, which is based on operations.

The Company has identified its President and Chief Executive Officer as the Chief Operating Decision Maker (CODM).

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The CODM also uses net sales to assess performance and allocate resources as this measure represents the amount of business the segment engaged in during a given period of time, is an indicator of market growth and acceptance of segment products, and represents the segment’s customers’ spending habits along with the amount of product the segment sells relative to its competitors.

Segment Data (in thousands):

Year Ended December 31, 2024

Year Ended December 31, 2023

Year Ended December 31, 2022

Trex Residential

Trex Commercial

Net Sales (1)

Cost of Sales

Selling, General, and Administrative Expenses

Loss on Sale (2)

Depreciation and Amortization

Interest Revenue

Interest Expense

Income Tax Expense (Benefit), Net

Net Income (Loss) (3)

Capital Expenditures

Total Assets (4)

(1) For the year ended December 31, 2022, Trex Residential net sales excludes $ 485 k of intercompany net sales.

(2) On December 30, 2022, the Company sold the assets of it wholly owned subsidiary, Trex Commercial, resulting in a loss of $ 15.4 million.

(3) For the year ended December 31, 2022, Consolidated net income and Trex Commercial net loss includes a loss on sale of Trex Commercial on December 30, 2022, of $ 15.4 million.

(4) The assets of Trex Commercial were sold on December 30, 2022.

The operating results for Trex Residential have historically varied from quarter to quarter.

In addition, the CODM reviews significant segment expenses with a primary focus on cost of sales and total selling, general, and administrative expenses.

These measures are provided in the accompanying Consolidated Statements of Comprehensive Income.

Segment assets are reported on the Consolidated Balance Sheets.

The operating results for Trex have historically varied from quarter to quarter.

Seasonal, erratic, or prolonged adverse weather conditions may reduce the level of home improvement and construction activity and can shift demand for its products to a later period.

As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand.

As part of its normal business practice and consistent with industry practice, Trex has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand.

The seasonal effects are often offset by the positive effect of the incentive programs.

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In the year ended December 31, 2025, the Company purchased reclaimed wood fiber requirements under purchase orders and long-term supply commitments.

All of the Company’s scrap polyethylene, aluminum and stainless-steel purchases are under short-term supply contracts that may average approximately one year, for which pricing is negotiated as needed, or under purchase orders that do not involve long-term supply commitments.

All of the Company’s scrap polyethylene, aluminum and stainless-steel purchases are under short-term supply contracts that average approximately one year, for which pricing is negotiated as needed, or under purchase orders that do not involve long-term supply commitments.

The wood and polyethylene supply contracts generally provide that the Company is obligated to purchase all wood or polyethylene a supplier provides, if the wood or polyethylene meets certain specifications.

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As of December 31, 2025 , the Company has purchase commitments under material supply contracts of $ 25.9 million for the year ending December 31, 2026, and a total of $ 34.3 million for the years ending December 31, 2027 through 2028.

Our purchase commitments do not currently extend beyond 2028.

Product Warranty

The Company warrants that for the applicable warranty period its Trex products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.

Products sold on or after January 1, 2023:

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With respect to Trex Signature railing, the warranty period is 25 years for both residential and commercial use.

The Company further warrants that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above.

The Company further warrants that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain

amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above.

If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price.

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The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience.

To estimate our future claims experience, the Company utilizes actuarial techniques to determine a reasonable possible range of amounts to be paid related to defects covered by our product warranty.

The actuarial techniques consider claims received, claims closed, and the corresponding amounts paid.

Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates.

Additionally, the Company accrues for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated, as necessary.

Trex Residential continues to receive and settle claims for decking products manufactured at its Nevada facility prior to 2007 that exhibit surface flaking and maintains a warranty reserve to provide for the settlement of these claims.

Estimating the warranty reserve for surface flaking claims requires management to estimate (1) the number of claims to be settled with payment and (2) the average cost to settle each claim.

To estimate the number of claims to be settled with payment, the Company utilizes actuarial techniques to determine a reasonable possible range of claims to be received and the percentage of those claims that will ultimately require payment (collectively, elements).

Estimates for these elements are quantified using a range of assumptions derived from claim count history and the identification of factors influencing the claim counts to determine its best estimate of future claims for which to record a related liability.

The cost per claim varies due to a number of factors, including the size of affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement.

The Company monitors surface flaking claims activity each quarter for indications that its estimates require revision.

Typically, a majority of surface flaking claims received in a year are received during the summer outdoor season, which spans the second and third quarters.

It has been the Company’s practice to utilize the actuarial techniques discussed above during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful.

Average cost per claim experienced in the year ended December 31, 2024, was lower than that experienced in the year ended December 31, 2023, and lower than the Company’s expectations for 2024.

The number of incoming claims received in the year ended December 31, 2024, was lower than the number of claims received in the year ended December 31, 2023 , and higher than the Company’s expectations for 2024.

After evaluating trends in incoming claims and closures in its actuarial analysis and combining these factors with future cost estimates, the Company recorded a reduction of $ 1.5 million to its warranty reserve for the future settlement of surface flaking claims in 2024.

The Company believes the reserve at December 31, 2024 is sufficient to cover future surface flaking obligations.

The Company monitors claims activity each quarter for indications that its estimates require revision.

The Company uses the best and most complete underlying information available and a rational methodology to determine its warranty obligations.

The Company considers all available evidence to assess the reasonableness of all key assumptions underlying its estimated warranty obligations.

During the fourth quarter of 2025, the Company utilized an actuary for the first time to review data on its product warranty.

This resulted in a change to the methodology in which the Company estimated its product warranty liability.

The reserve increased during the period, largely due to the refined methodology, which decreased the Company’s income before income taxes by $ 6.0 million, decreased net income by $ 4.4 million, and reduced diluted earnings per share by $ 0.04 .

The Company’s analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations.

Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause the actual warranty liabilities to be higher or lower than those projected, which could materially affect the Company’s financial condition, results of operations or cash flows.

The Company estimates that the annual number of claims received will continue to decline over time and that the average cost per claim will increase slightly, primarily due to inflation.

If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or increase in earnings and cash flows in future periods.

The Company estimates that a 10 % change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $ 0.6 million change in the estimate of the surface flaking warranty reserve.

The Trex Residential product warranty and surface flaking reserves activity consisted of the following, and is included in Accrued warranty and Non-current accrued warranty in the Consolidated Balance Sheets (in thousands):

Projecting future events such as the number of claims to be received, the number of claims that will require payment and the costs associated with settling claims could cause the actual warranty liability to be higher or lower than projected, which could materially affect the Company’s financial condition, results of operations or cash flows.

The Company estimates that a 10 % change in the expected future claims activity may result in approximately a $ 3.0 million change in the estimate of its product warranty reserve.

The Trex product warranty reserve activity consisted of the following, and is included in Accrued warranty and Non-current accrued warranty in the Consolidated Balance Sheets (in thousands):

Year Ended December 31, 2025

Trex Product Warranty

Beginning balance, January 1

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Year Ended December 31, 2024

Trex Product Warranty

Beginning balance, January 1

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Ending balance, December 31

As of December 31, 2025 the Company's reserve of $ 29.7 million is within the estimated range of possible loss associated with product warranty claims.

The Company’s estimate of the range of possible loss for product warranty claims associated with product sold through December 31, 2025 is between $ 24.8 million and $ 45.6 million.

The company utilized an actuary in calculating a range of possible loss for product warranty claims.

Actual experience could exceed the range due to uncertainty associated with the future number of claims expected to be closed with some payment and estimates of the costs associated with servicing those claims.

Industrial Revenue Bonds

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Construction on the new facility began in the second quarter of 2022.

In connection with the construction of the new facility, during 2024 the Company and Little Rock entered into an agreement in which Little Rock agreed to issue up to $ 450 million of its industrial revenue bonds (IRBs) for the purpose of constructing a manufacturing facility.

In connection with the construction of the new facility,

during 2024 the Company and Little Rock entered into an agreement in which Little Rock agreed to issue up to $ 450 million of its industrial revenue bonds (IRBs) for the purpose of constructing a manufacturing facility.

Under the agreement, the Company transferred ownership of the facility to Little Rock and simultaneously leased the related asset from Little Rock.

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The Company has a purchase option included in the lease agreement for below the fair value of the asset, which prevents the transfer of the asset to Little Rock from being recognized as a sale.

Furthermore, the Company has not derecognized the

transferred asset and continues to recognize it in property, plant and equipment in the Consolidated Balance Sheets.

Furthermore, the Company has not derecognized the transferred asset and continues to recognize it in property, plant and equipment in the Consolidated Balance Sheets.

The Company has the right and intends to set-off any obligations to make payments under the finance liability, with proceeds due from the IRBs.

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Year ended December 31, 2025:

Trex Residential product warranty reserve

Trex product warranty reserve

Income tax valuation allowance

Year ended December 31, 2024:

Trex Residential product warranty reserve

Trex product warranty reserve

Income tax valuation allowance

Year ended December 31, 2023:

Trex Residential product warranty reserve

Trex product warranty reserve

Income tax valuation allowance

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures